Small Caps Enjoy Best of Action
by Chart School - July 19th, 2018 5:49 pm
Courtesy of Declan.
There wasn’t a whole lot going on today except Small Caps were able to attract some buyers despite finishing below resistance; bulls have been taking advantage of the 20-day MA test. Today’s action coincided with ‘buy’ signals in the MACD and +DI/-DI.
The S&P held its breakout and today’s losses – despite higher volume selling – didn’t do a whole lot of damage.
The Nasdaq also held its breakout but has less wiggle room than the S&P. The index has a slight advantage in relative performance against the S&P. Those believing in the breakout could be buyers here but don’t hang on if there is an acceleration down through 7,800.
The Nasdaq 100 has more wiggle room and despite some relative performance loss there does appear to be a turnaround. Again, the index clocked up some distribution selling but it was not convincing.
The Semiconductor Index is still the watch index for Tech indices. I have redrawn it as a consolidation triangle with minor resistance at 1,375; the index suggests a second shorting opportunity with the 50-day MA lending weight to this play. How this plays out will influence the breakouts for the Nasdaq and Nasdaq 100.
The Dow Jones drifted back a little but remains in course for channel resistance.
For tomorrow, look to the Russell 2000 to break to new highs and for the Nasdaq, Nasdaq 100 and S&P to hold their breakouts. The margins are fine but if the Russell 2000 can regain some relative momentum it may be the value play into the Fall.
You’ve now read my opinion, next read Douglas’ blog.
I trade a small account on eToro, and invest using Ameritrade. If you would like to join me on eToro, register through the banner link and search for “fallond”.
If you are new to spread betting, here is a guide on position size based on eToro’s system.
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Pareto
by ilene - July 19th, 2018 11:29 am
Pareto
Courtesy of Michael Batnick
I tweeted this chart earlier.
This chart shows that the five largest S&P 500 stocks have a market capitalization equal to the bottom 282 S&P 500 stocks. This turned out to be something of a Rorschach test, which was not my intention. I just thought it was a powerful visual. I wasn’t really trying to make a point, certainly not the point that many thought I was going for.
The reason I made that chart was because I was working on this post today, which will attempt to show that there are plenty of other stocks outside of FAANG that are doing just fine. That tweet had the opposite effect. Hopefully this will remedy that.
The chart below shows the average returns of S&P 500 stocks year-to-date broken down by market cap decile. The first decile is the 50 largest stocks, the second decile is the next 50 largest stocks, and so on. You can plainly see that while the mega caps are performing well, and powering the index higher, there are other stocks that are doing just fine. The 4th, 6th, and 7th deciles are performing better than the 2nd and 3rd.
It is pretty wild to think that the five largest stocks are as large as the bottom 282 S&P 500 stocks, but the truth is, this is how a cap weighted index works. Yum! Brands can triple and it still would not move the needle of the index as much as if Apple gains 1%.
We are not in uncharted territory. The Pareto Principle is a feature of financial markets, not a bug. This chart from Patrick O’Shaughnessy shows how remarkably steady this has been over history.
This chart below from S&P (h/t Lawrence Hamtil) shows that the top five stocks are not nearly as large a portion of the index as they used to be. What makes today unique is the top five are tech stocks (I know Amazon is technically consumer discretionary). It obviously wasn’t always like this. In 2010, for example, the top five were Exxon, Microsoft, Apple, Proctor & Gamble, and Johnson & Johnson.
…
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S&P Firms Breakout As Tech Keep The Pressure On
by Chart School - July 17th, 2018 5:29 pm
Courtesy of Declan.
Given overnight news and Netflix disappointment I was surprised to see markets finish as strong as they did given comments on the economy by the Fed Chairman.
The S&P opened at support and ‘engulfed’ the prior day’s trading; it’s not a true bullish engulfing pattern as this is a reversal pattern and what we have is a breakout but it does contribute to a confirmation of the breakout.
The Dow Jones is inching towards channel resistance. In the context of other indices, it was a low key day.
The Nasdaq threatened a nasty double top after the market gapped down but a strong push into the close retained the breakout.
Opportunists could have taken advantage of the gap down in the Nasdaq 100 as it started picture-perfectly at breakout support. Some traders did get lucky as volume climbed to register as accumulation.
The biggest gain was in the Semiconductor Index but it didn’t quite negate the breakdown. I would be looking for shorts to attack this tomorrow with the 20-day and 50-day MA overhead.
The Russell 2000 is firming support at the 20-day MA and the risk:reward is looking better here for longs wanting to prebuy a challenge on resistance. Technicals are still mixed and relative performance remains weak but it looks good.
For tomorrow, aggressive shorts can look to the Semiconductor Index but if Tech indices hold their breakouts it could drag the Semiconductor Index higher. Indeed, the Nasdaq 100 had offered the clearest buying opportunity today which finished in the green. The Russell 2000 is struggling a little below resistance but the lack of attention could be beneficial for those looking for a low-risk buying opportunity. There are chances here but markets are at a bit of a crossroads.
You’ve now read my opinion, next read Douglas’ blog.
I trade a small account on eToro, and invest using Ameritrade. If you would like to join me on eToro, register through the banner link and search for “fallond”.
If you are new to spread betting, here is a guide on position size based on eToro’s system.
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‘PPT’ Or Not ‘PPT’ – That Is Today’s Question…
by Zero Hedge - July 17th, 2018 4:01 pm
Courtesy of ZeroHedge. View original post here.
"Powell, we love you, but you only have seven-and-a-half hours to save the market"…
Netflix spoiled the market's party last night…
But – China's National Team seemed busy at the close to save the day…
And – European stocks were levitated…
AND – as the US equity market opened for business this morning – just like that, the Nasdaq went vertical…
For some context of how unusual this is…IT'S NEVER HAPPENED EVER BEFORE!!!!
This would be the first time in the history of $QQQ that it gapped down more than 1% at the open and reversed to close at a 52-week high.
— SentimenTrader (@sentimentrader) July 17, 2018
The bond market was thoroughly unimpressed by the sudden buying panic in stocks…
One thing is notable – the oddly systemic pumps and dumps intra-month in stocks are lining up awkwardly well with the Fed's SOMA unwinds…
A big BTFD in FANGs today…to a new record high
Treasuries were practically unchanged on the day, despite the surge in stocks…
But the yield curve flattened, erasing yesterday's steepening…
The Bloomberg Dollar Index surged today, erasing yesterday's weakness…
Cable had an ugly day as May once again found herself fighting for survival…
Yuan tested up to its Fix again then dumped…
Cryptos screamed higher today…
With Bitcoin back above $7,000…
Gold and silver were whacked but crude continues to languish…
Gold dropped to 18 month lows…
Finally, we note this happened…
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Tech stocks contributed 98% of the S&P 500′s 2018 gain
by ilene - July 17th, 2018 2:57 am
Tech stocks contributed 98% of the S&P 500’s 2018 gain
Courtesy of Joshua M Brown
The S&P 500 is up 2.6% year to date through the first half and technology stocks have contributed approximately all 2.6% of it.
Just a few large tech stocks in particular.
Savita’s equity and quant group relays the following:
Only three sectors outperformed in the first half On a total return basis, Discretionary +11.5%, Tech +10.9% and Energy +6.8% beat the market. Energy was 2Q’s best-performing sector (+13.5%) after turning amongst the worst returns in 1Q. Tech was the single-biggest contributor to the S&P 500’s 1H gain, contributing 98% of the S&P 500’s total return. Excluding FAANG, the total return would have been negative (-0.7%) in the 1H. Staples (-8.6%) and Telco (-8.4%) were the worst.
and a pair of charts illustrating this:
Josh here – Now, of course, every bull market has its leadership stocks. This one is no different, albeit the concentration at the top is fairly high because of the sheer size of the companies’ market caps we’re talking about.
But another leadership area thus far has been the small caps – the Russell has made new highs repeatedly, owing to an investor preference in US-focused domestic stories and the continued strength of the dollar this year.
So there’s more going on here, it’s just been tremendously overshadowed.
Source:
1H18: good micro, bad macro
Bank of America Merrill Lynch – July 16th, 2018
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BofA: Excluding FAANG Stocks, The S&P Would Be Negative
by Zero Hedge - July 16th, 2018 2:45 pm
Courtesy of Zero Hedge
Two weeks ago, Goldman made a surprising finding: as of July 1, just one stock alone was responsible for more than a third of the market's YTD performance: Amazon, whose 45% YTD return has contributed to 36% of the S&P 3% total return this year, including dividends. Goldman also calculated that the rest of the Top 10 S&P 500 stocks of 2018 are the who's who of the tech world, and collectively their total return amounted to 122% of the S&P total return in the first half of the year.
And another striking fact: just the Top 4 stocks, Amazon, Microsoft, Apple and Netflix have been responsible for 84% of the S&P upside in 2018 (and yes, these are more or less the stocks David Einhorn is short in his bubble basket, which explains his -19% YTD return).
Now, in a review of first half performance, Bank of America has performed a similar analysis and found that excluding just the five FAANG stocks, the S&P 500 return in H1 would have been -0.7%.
FAANGs aside, here are the other notable sector observations about a market whose leadership has rarely been this narrow:
- Only three sectors outperformed in the 1H (Discretionary, Tech and Energy). Meanwhile, Staples and Telecom were the worst-performers in the 1H.
- Energy staged the biggest comeback in 2Q to become the quarter's best-performing sector after turning in among the worst returns in 1Q.
- Industrials and Financials notably underperformed in June, the 2Q, and the 1H while Discretionary and Energy outperformed in all three.
Looking at the entire first half performance, tech predictably was the biggest contributor to the S&P 500's 1H gain, contributing 2.6ppt or 98% of the S&P 500's 2.6% total return.
The broader market did ok: trade tensions, negative headlines, and the slow withdrawal of Fed liquidity contributed to volatility's return in June and earlier in February, but the S&P 500 still ended 2Q +3.4% and the 1H +2.6%, outperforming bonds and gold.
The Russell 2000 led the Russell 1000 by 4.9ppt in…
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Week Finishes in Tech and Large Caps Favour
by Chart School - July 15th, 2018 6:36 pm
Courtesy of Declan.
Large Caps and Tech indices enjoyed a good week with breakouts holding by Friday’s close. There was no real volume on the breakouts but new highs leave markets in a position to attract sideline money.
The S&P didn’t do a whole lot on Friday but it remains on course to test channel resistance. Technicals are all in the green and the previous period of underperformance against the Russell 2000 looks to have shifted back in Large Caps favour.
The Nasdaq didn’t quite convince on its breakout but On-Balance-Volume has managed a new reaction high while other technicals are bullish. Wednesday’s swing low is the risk level for new buyers and there is likely value for a long trade based on Friday’s finish.
The Nasdaq 100 had the stronger breakout of the two Tech indices. It will run into resistance before other indices but also has the most room to defend support.
The index struggling a little for attention is the Russell 2000. While Friday’s broader market gains were small they didn’t get as far as the Small Caps index. The double top remains in play and aside from relative performance, other technicals are okay.
For tomorrow, bears will be looking to push nascent breakouts back below their latter support levels and generate a new round of ‘bull traps’ (shorting opportunities). Profit taking is also likely. However, if sellers fail to make their presence felt in early morning trading sideline bulls will become encouraged to step in and bid markets higher; Wednesday’s swing lows will become ‘stop’ levels for measuring risk (vs potential reward).
You’ve now read my opinion, next read Douglas’ blog.
I trade a small account on eToro, and invest using Ameritrade. If you would like to join me on eToro, register through the banner link and search for “fallond”.
If you are new to spread betting, here is a guide on position size based on eToro’s system.
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Weekly Market Recap Jul 15, 2018
by Chart School - July 15th, 2018 4:04 pm
Courtesy of Blain.
The NYSE McClellan Oscillator flipped to black late in the week prior to the last, and usually that bodes well short term. Indeed that foreshadowed a nice week. TRADE WARS ™!!!! certainly seems like a “sell the rumor, buy the news” event.
“Given the rhetoric over the past few weeks, it seems like the probability of a trade war has increased. However, in the short term I still think there’s a relatively low probability that one will actually occur. And in the meantime, U.S. economic data has been good, and the Street knows this will be a good year for earnings,” said Scott Wren, senior global equity strategist for Wells Fargo Investment Institute.
“With the prospect of a positive earnings season ahead of us, investors seem to have forgotten the threat of further trade tensions,” said Konstantinos Anthis, head of research at ADS Securities, in a note Tuesday.
Wednesday was the one day the indexes took a hit (momentarily) after the White House late Tuesday said it would assess 10% tariffs on a further $200 billion in Chinese goods.
The new tariffs won’t take effect for at least two months, administration officials said, giving U.S. industry time to comment on the products selected for levies — and for the two sides to start a new round of talks.
“This is different from the other trade announcements, because the size is significantly larger, and because China is unable to directly reciprocate at $200 billion because they don’t import that much. It’s unclear what it might do next, but it is clearly another step closer to a full-blown trade war,” said David Carter, who oversees about $2 billion as chief investment officer at Lenox Wealth Advisors.
Bloomberg reported late Wednesday that officials from both countries have raised the prospects of restarting a conversation at a high level.
Earnings season began in earnest Friday with financials – earnings are set to explode this quarter on the back of massive tax cuts enacted…
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Reading the tape of ticker CVR Partners (UAN)
by Chart School - July 13th, 2018 7:14 pm
Courtesy of Read the Ticker.
This stock is going from very bad, to bad, but this change is good enough to change share price.
More from RTT Tv
Reference turnaroundstockinvesting.com, fundamentals for CVR Partners (readtheticker.com is not a member nor has any association to this service).
Sure fundamentals do matter, and so does market timing (entry, stops and exit), here at readtheticker.com we believe a combination of Gann Angles, Cycles and Wyckoff Logic is the best way to secure better timing than most, after all these methods have been used successfully for 70+ years. With our website you can chart any security in the world.
NOTE: readtheticker.com does allow users to load objects and text on charts, however some annotations are by a free third party image tool named Paint.net
Investing Quote…
..“It is foolhardy to make a second trade, if your first trade shows you a loss. Never average losses. Let this thought be written indelibly upon your mind.”..
Jesse Livermore
..”Money can’t buy you happiness but it does bring you a more pleasant form of misery”..
Spike Milligan
..”It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong”..
George Soros
..”Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it”..
Warren Buffett
..”The stock market is filled with individuals who know the price of everything, but the value of nothing”..
Philip Fisher
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Tech Indices Ignore Semiconductor Weakness to Breakout
by Chart School - July 12th, 2018 6:22 pm
Courtesy of Declan.
Tech Indices are not waiting on the Semiconductor Index aa both the Nasdaq and Nasdaq 100 closed at new all-time highs. The Nasdaq 100 had the best response with a clear breakout. This move accelerated the relative advance against the Russell 2000 setting things up nicely for a challenge of upper channel resistance.
The Nasdaq also enjoyed an uptick against the S&P as it inched a new high. Volume climbed to register accumulation. Technicals are all net bullish.
The S&P also generated a breakout which was enough to negate the ‘bull trap’. Relative performance continued its recovery after four months of decline. As with Tech indices, the upside target is channel resistance.
The index with work to do is the Russell 2000. It was able to make some ground but not to the same degree as Tech and Large Cap indices. The double top remains in play and with relative performance moving sharply lower, Small Caps could struggle to attract buyers.
For tomorrow, bulls are back in the driving seat after yesterday’s whipsaw short trades in Tech indices. With relative performance moving away from Small Caps to Tech and potentially Large Cap indices new trading opportunities are starting to emerge.
You’ve now read my opinion, next read Douglas’ blog.
I trade a small account on eToro, and invest using Ameritrade. If you would like to join me on eToro, register through the banner link and search for “fallond”.
If you are new to spread betting, here is a guide on position size based on eToro’s system.
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
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